Unions have called on the government to do everything it can to protect Carillion workers

Carillion contractor ‘could enter administration soon’

Transport Secretary Chris Grayling faces mounting criticism for his department’s decision last year to give the ailing construction company Carillion a share of contracts for the HS2 railway line.

The accusation came as officials have warned that Carillion could enter administration on Monday.

Mr Grayling is accused of giving the firm a part of the work only a week after the company issued a shock profit warning that in effect was the beginning of its dire financial woes.

 Unions have called on the government to do everything it can to protect Carillion workers

Unions have called on the government to do everything it can to protect Carillion workers

Carillion is a major Government contractor in charge of building projects such as the HS2 rail project

Carillion is a major Government contractor in charge of building projects such as the HS2 rail project

He has insisted that at the time he was given ‘secure undertakings’ about the health of the company.

But Andrew Adonis, the former chair of the government’s national infrastructure committee, said the minister had behaved negligently.

‘They got HS2 contracts from him after their troubles emerged in the summer, raising big questions about his due diligence and judgment,’ he said.

Labour’s shadow Cabinet Office minister Jon Trickett was equally critical.

Why Carillion has careered into crisis

The Wolverhampton-based firm, the backbone behind a raft of public infrastructure projects, is teetering over a precipice.

The company is the second largest construction firm in the UK but has debts of about £1.5billion and a pension fund shortfall of almost £600million.

So how has it got into this mess? Most analysts agree that the answer is simple. It has over-reached itself.

Carillion they argue has its fingers in too many pies at homes and abroad from the Battersea Power station redevelopment in the UK to operations in Canada, the Middle East and the Caribbean.

The company’s incessant desire to expand has resulted in it pursuing too many risky contracts – some accompanied by questionable accounting practices – that have become increasingly unprofitable.

It has furthermore faced delays in payments in the Middle East.

The firm in recent months has found it much harder to manage its mountainous debt pile and pension deficit.

In December Carillion managed to persuade lenders to give it more time to repay them. But the company’s banks are now understood to be unwilling to lend it any more cash.

‘It has been clear for months that Carillion has been in difficulty but the government has continued to hand over contracts to the company even after profits warnings were issued,’ he said.

‘Jobs and public services are now at risk because the Tories were blinded by their commitment to a failing ideological project of introducing the profit motive into taxpayer-funded services.

‘Labour urges the government to stand ready to intervene and bring these crucial public sector contracts back in-house in order to protect Carillion’s employees, pension holders and British taxpayers.’

Whitehall insiders however are adamant that the HS2 contracts were ‘stress tested’ to ensure that if one contractor pulled out, others in the consortium would have been able to make up the shortfall.

Carillion said on Friday it remained in ‘constructive discussions’ with its creditors and suggestions that they had rejected its business plan were factually wrong.

Any collapse of Carillion, which provides services to government departments including justice, health and education, and has built hospitals, roads and rail lines, would be felt across Britain and also in Canada and the Middle East where the 200-year-old company has worked on numerous prestigious landmark projects.

Carillion declined to comment on a Saturday Sky News report, which said government officials are due to meet on Sunday to discuss the company’s future.

Liberal Democrat leader Sir Vince Cable has insisted that shareholders and creditors, rather than taxpayers, should take the financial ‘hit’ of saving the struggling construction giant from collapse.

He rejected suggestions the company should benefit from a Government bailout to avoid major public sector projects being plunged into chaos.

Shares in Carillion plunged almost 30 percent to a new low on Friday after Sky News reported it had put administrators on standby, while an official told Reuters that creditors did not like the plan put forward.

Tensions over the future of Carillion have been rising for weeks and on Thursday ministers overseeing everything from justice to transport, health and education met to discuss how they should respond to the possible demise of a business that plays a central role in British public life.

Carillion has been left with debts of £1.5billion following an accounting scandal.

It also has a pension black hole of £587million that puts the retirements of 28,500 at risk.

Unions earlier this week called on the Government to do all it can to protect workers at the firm.

The firm employs about 43,000 people worldwide and also manages and maintains army and hospital buildings, roads in addition to swathes of Britain’s internet infrastructure.

Last July it revealed ballooning debts amid delays in collecting cash from clients, problems on contracts and a downturn in new business.

It issued three profit warnings last year amid falls in projected revenues and also faces an investigation by the City regulator Financial Conduct Authority into the information it divulged to shareholders in the run-up to its July trading update.

Carillion is playing a major role in the HS2 railway development

Carillion is playing a major role in the HS2 railway development

Posted on; DailyMail>>

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